The Journal. - Will Getting Rid of Bosses Fix the Workplace?

Episode Date: March 26, 2024

Bayer is throwing out the corporate playbook to try a radical experiment: getting rid of a huge swath of its bosses. After years of tumbling stock prices, the company has decided to give workers more decision-making power. WSJ's Chip Cutter talks about how this boss-less plan is being implemented among Bayer's 100,000 employees. Further Reading: -One CEO’s Radical Fix for Corporate Troubles: Purge the Bosses  -The Boss Wants to Make You More Efficient  Further Listening: -The New Layoff: On a Wednesday On Zoom  -The End of the GE Era  Learn more about your ad choices. Visit megaphone.fm/adchoices

hating on your boss is kind of a national pastime especially if they're the kind of middle manager that doesn't have much power but really wants it in pop culture bosses are often portrayed as out of touch not very good at their jobs, and just cringe. Like Michael Scott from The Office. People say I am the best boss. They go, God, we've never worked in a place like this before. You're hilarious. And you get the best out of us.

Or they're suck-ups, like Succession's Tom Wamsgans. So yeah, as a manager, I think, you know, I'm simple. You know, I squeeze the costs and juice the revenue. Follow the boss. You know, I digest strategy and implement. Or they're exceptionally passive-aggressive, like Bill Lumberg, the boss from the movie Office Space. We have sort of a problem here. Yeah, you apparently didn't put one of the new cover sheets on your

TPS reports. Oh, yeah. I'm sorry about that. I forgot. Yeah. But what if middle managers just went away? That's exactly what one company is trying to do. Bayer, the multi-billion dollar pharmaceutical firm best known for making aspirin, is getting rid of a huge percentage of its managers. I was fascinated by this. This idea of a company trying to get by with sort of the bare minimum number of bosses. I just, I was like, wait, is there any way this can work? Like, what is this? What are they trying to achieve here? That's our colleague Chip Cutter, who covers corporate management. He took a close look at what's happening at Bayer. We've seen a lot of different attempts over the years to restructure companies

or flatten organizations, get rid of layers. To me, this felt like something different. And it's the CEO of Bayer really trying to just change how the modern company is run. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Tuesday, March 26th. Coming up on the show, can Bayer lose its bosses without breaking the company? the USA for your next vacation. Ready to kick off? Discover exciting games and events. Plus,

find amazing hidden gems in cities full of adventures, delicious food, and diverse cultures. You'll love it so much you'll want to extend your stay beyond the matches. Get the ball rolling on your soccer getaway. Head to visittheusa.com. Bayer is a 160-year-old company based in Germany. People might know them best for aspirin, for Bayer aspirin, but they do a lot more. They make Aleve, they make Claritin, they make one-a-day vitamins, they make a range of different cancer drugs, for example. They also make herbicides used in crops. They sell corn and soybean seeds.

It's a giant company. It has 100,000 people. Recently, the business hasn't been doing well. There have been drug trials that didn't work out and costly lawsuits against its agribusiness arm. Its stock is down about 50% over the past five years. It's just a company where a lot of things have just not gone right for them. And there's just been frustration from shareholders over what this company is doing. And I think that's the feeling why the company needs to turn to something dramatic to change how it's run. To do that, Bayer hired a new CEO in 2023.

His name is Bill Anderson. Bill Anderson is a 57-year-old longtime biotech executive. He was a chemical engineer by training. He then rose through the ranks at various companies. He was the CEO of Genentech, which is a biotech company. He then became the CEO of Roche Pharmaceuticals. And then he takes this job last year at Bayer. With that background, Anderson might not sound like a managerial revolutionary, but he's had an interest in upsetting the org chart for a while. And he

took that interest to Bayer. He comes to this company, starts making a real grand tour, talking to employees around the world, and just keeps getting the same feedback. Employees tell him, this company is too bloated, it's too slow. We have all these layers and layers of bosses where leaders at the top would decide on the strategy

and then it would just trickle down to the people who actually did a lot of the day-to-day work. And employees tell him, I'm 10 layers below the CEO, and I have ideas for how this company could be better, but they'll never be heard because there are just so many people above me who are making those decisions.

Anderson's solution for this dysfunction and the company's falling stock price? Get rid of the status quo organizational structure. This is like, no, no, no, we're blowing that all up. You're talking about fundamentally rewiring everything in the company. That's Anderson talking to Chip a few months ago about his vision. It's more like a living organism. And in the old system, of course, you had to be able to present it all on a piece of paper because management's job was to control it. We'll end up with, for example, we'll still have an org chart for administrative purposes,

you know, who signs whose paycheck or whatever, but the org chart won't actually represent how the work's getting done. Anderson gave his new organizational structure a very corporate-sounding name. He's calling it dynamic shared ownership. This is a term that he coined. He admits it's maybe not the sort of the flashiest term, but he thinks it's the best way for describing what they're doing here. The idea is to empower employees to make big decisions

without having to get the approval of layers and layers of management. Our people, if you look what they're doing outside of work, big decisions without having to get the approval of layers and layers of management. Our people, if you look what they're doing outside of work, they're running a family, they're involved in their church, they're involved in their community, they're organizing, you name it, they're doing stuff. They're taking responsibility, they're owning decisions. This is not a foreign concept to them. They've gotten educated in great colleges and then they come to an office where they're basically given this little job and like, oh yeah, you don't make decisions. And so no wonder people are so disillusioned with corporate life. His view is that people want to feel like they have progress in their career and they want to feel that they can get something done. That is his belief that basically people are incredibly inventive and creative and smart. They know what needs to be done.

Employees will be organized into small teams that will work on specific projects. These teams will operate on their own and won't be led by managers, which means the company will need far fewer of them. Anderson is planning to cut 40% of management positions in the U.S. pharmaceutical division alone. Is this possibly just a dressed-up way of mass layoffs? Bayer would argue no, this is more than just a big dressed up cost cutting exercise because we've seen those over the years. A lot of companies,

particularly right now, are just talking about how they're trying to flatten themselves. You hear a lot of executives talking about this is the age of efficiency. We need to be more productive. We need to do more with less. You hear that in one company after another.

Bayer is, of course, doing some of this. There are going to be job cuts. They do want people to be more productive. But at the same time, they say that they're trying to sort of fundamentally change how work is done, too. It's not just getting rid of layers. It's changing how everyone does their jobs. So this phrase is called dynamic shared ownership. Does the ownership mean that employees will now get like stock, like actual ownership of the company? Well, that's, I think, sort of to be determined because pay is a big question in all this. And so there's now teams within HR that are trying to figure

that out. But it's one of just many open questions that are out there as Bayer tries to go down this new path. What's at stake for Bayer? The CEO's job is on the line, but the fate of this company is too in a lot of ways. I mean, this is an organization that is under great pressure to turn itself around. I think a lot of people want to see change and they want to see it quickly. Employees are frustrated.

Investors are frustrated. This is something where the company needs to do something differently and they need to do it fast. But how will Anderson keep the company from devolving into total chaos? That's after the break. Thank you. or a consultant. You can get customized coverage for your business. Contact a licensed TD insurance advisor to learn more. Own each step with Peloton. From their pop runs to walk and talks, you define what it means to be a runner. Whatever your level, embrace it.

Journey starts when you say so. If you've got five minutes or 50, Peloton Tread has workouts you can work in or bring your classes with you for outdoor runs, walks, and hikes led by expert instructors on the Peloton app. Call yourself a runner. Peloton All Access membership separate. Learn more at onepeloton.ca slash running. One of Bill Anderson's challenges is getting a company with 100,000 employees on multiple continents to buy into his boss-free vision of dynamic shared ownership. Because it's not self-explanatory, we wanted to take some time to walk through exactly what dynamic shared ownership,

or DSO, is and what it yields. Here's Anderson introducing the idea in a company video. Today it's important because it's going to offer you a glimpse into a fundamental redesign of our company, a reimagination of the way a multinational company can operate. We're moving at unprecedented speed and scale with the goal of getting Bayer back to delivering more productive, mission-focused work, world-leading innovation, and superior financial results. Bayer says about 4,000 of its employees are already working under this new system. As it rolls out, employees are going to group training sessions

to learn how to manage themselves without a boss. The company wants to have everyone trained by the end of the year. Chip went to one of these training sessions at Bayer's New Jersey campus earlier this year. So welcome back. He joined a group of about 50 employees in a conference room with a facilitator.

You just stand up and share an idea. The facilitator said, hey, shout out a big idea. Shout out something you want to do. And if your colleagues agree, you should go stand next to that person. So someone said, like, I want to launch a product in the next six months that meets sort of some unmet consumer needs somewhere. Whoever is interested, stand up and join. Just vote with your feet. And a bunch of people were like, actually, you know, that sounds intriguing. I want to work on

that. And other people proposed different ideas and everybody sort of talked it out. The goal of this system is to allow the best ideas to rise to the top, regardless of who proposed them. Next, teams of between 15 to 20 people take those ideas and work on them, typically for 90 days. Then the process starts all over again, and people will move on to new groups or new projects.

Anderson says these teams will have a lot of power. They'll be able to call the shots without having to get everything approved by the higher-ups. He wants people to just stop the busy work. He doesn't want people to spend their days building PowerPoint presentations for executives or writing summaries of what they're doing so that someone

a few layers up the chain can have a sense for sort of how their teams are spending their time. He wants people to be focused on doing the real work. That sounds great in theory, like just focus on the stuff that matters. Don't do the busy work. But like, I feel like where the rubber meets the road, when you need buying from other people in the company, you need your ideas to be challenged, you know, to make sure that they are actually good ones. Yeah. I mean, you're hitting on all the challenges here, which are real.

And obviously there's people a few layers up the chain who are still around and are going to be weighing in on some of this. But Bill's belief is that peers can kind of figure out a strategy that's going to work and one that doesn't. He gave the anecdote in one of our discussions where he said, how many times have you been in a meeting where someone lays out their grand plan

and then everybody afterwards sort of snickers and is like, there's no way that actually is going to work. This is so stupid. And he says, like, let's bring some of that out into the open. Uh-huh. So it's sort of like employees are going to, in some ways, choose whose ideas they think are the best and the most interesting, and then they'll just go and try to find a way to work on that.

That's exactly right. most interesting, and then they'll just go and try to find a way to work on that. That's exactly right. How are they going to resolve disputes between people? I mean, there's going to certainly be disagreements about direction. There will be. And that's where it gets a little bit complicated. And it kind of remains to be seen how these debates all play out. Bayer has people with various titles like coaches and catalysts and visionaries, people who are a little more senior within the company or just helping teams figure out

how to make dynamic shared ownership actually work in reality. But there's also still going to be leaders of divisions who have a vision for where they want all of this to go and what the group should be achieving. So it's not like everybody's going to be fully on their own here, but it is going to look a lot different than what most people are used to inside of a modern company. Some people have said DSO is like learning a new language. It's just so dramatically different

from how they've understood companies up to this point. In the new system, Anderson says employees will be judged by their peers, not bosses. His belief is that when people are accountable to their peers, they actually do better work. And I think we've all been inside companies where if we were asked to point out who the slackers are, we could probably do it. We have a sense for who's really doing their jobs and who isn't. And that's his belief is that the sort of underperformers will be flushed out naturally through this because people will want to hit their results.

They'll want to get things done. And right now people say, well, that's my manager's problem to deal with that. And Bill wants people to say, that's my problem. Like if we can't hit a result, we have to deal with that. Will they just have like a tribal council every week

where one person gets voted off the island? I mean, it may not be as dramatic as that, but I think sort of in principle, the company doesn't want the underperformers to sort of be able to hide inside the company. Like your peers are going to know whether you're contributing or not, and they're going to speak up if people aren't pulling their weight. Anderson didn't come up with all the concepts himself. Some of the principles have been written about in management books over the years. And companies, including Best Buy and GE Appliances, credit their turnarounds to making similar changes in the past.

That's what Anderson wants for Bayer, even if he admits the rollout might be bumpy. The first go-round, it'll be a little messy, but that's okay. Because the thing we're comparing to is a system that doesn't work very well. So this is the thing. We don't actually have to be that good to beat the current system. If this succeeds, how do you think it could change corporate America? I think it could be really powerful. Like a lot of

employees are not happy in their corporate jobs. They feel like it's just frustrating day to day. They kind of forget what they're even there for. I think this could, like he is onto something here. I mean, as people can say, like these concepts are hard to understand or what are these terms that we're learning, whatever it is, but like he genuinely is hitting on problems that are inside every company here. And so I think if this actually works and you're able to kind of have a different structure, one where people feel like I'm actually achieving something, that could be really good. I mean, work takes up so much of our lives. So if you can be happier with what you're doing, that can sort of spill into the rest of your life too.

Normally, employees sort of do what their bosses tell them to do. But it sounds like Bill Anderson's system is to spread out the power and have more like employees tell the bosses what they ought to be doing. It really is that, essentially. I mean, it's employees having a voice

and being able to say, here's what I think we really should do, or here's how we should organize ourselves. And there are guardrails, of course, but it's really flipping the model on its head. Is corporate America ready for that? It might not be. I mean, we're going to see over the next year as this

plays out, like what happens at Bayer. I think this is going to be a test that a lot of people watch. Anybody who has gotten an early taste of this, you know, a lot of former CEOs, management thinkers and others, they are all captivated by what happens here because Bayer is touching on problems that are so familiar throughout corporate America. And so if this works, it could be dramatic. That's all for today. Tuesday, March 26th. The Journal is a co-production of Spotify and The Wall Street Journal.

Special thanks to my boss, who's one of the greatest people in the world and totally, completely necessary. Thanks for listening. See you tomorrow.